Defusing the debt bomb and the state of the fiscal union

Whatever the White House does, the national debt figures to be a major issue in the 2010 midterm elections, says Matthew Continetti, an Associate Editor with the Weekly Standard.

For example:

The public debt of the United States is 53 percent of gross domestic product (GDP) and rising.

A new study from the Peter G. Peterson Foundation projects it will reach 85 percent of GDP by 2018; 100 percent by 2022; and 200 percent in 2038.

What debt can do to a society is well known. Besides the restrictions it places on future generations, excessive government borrowing crowds out private investment and can lead to higher interest rates. Now there is new evidence that massive debt hampers economic vitality, says Continetti:

In a January 2010 paper, “Growth in a Time of Debt,” economists Carmen M. Reinhart and Kenneth S. Rogoff find that, above a debt-to-GDP ratio of 90 percent, “median growth rates fall by 1 percent, and average growth falls considerably more.”

From CivFi.com – a website –

– “created to answer a need for greater discussion among and between investors and policymakers on the issues of financial sustainability. With debt-fueled economic growth no longer feasible, it is important to formulate new financial models to maintain government services and make wise infrastructure investments.”

When fiscal conservatives run for office, or fiscally conservative initiatives are put onto the ballot, the candidates and proponents have to go out and ask for money to finance their campaigns.

But in the case of public sector unions, who overwhelmingly support fiscally liberal, big government programs, and consistently oppose attempts to shrink the size of government, this is not the case.

In California, for example, every year these unions automatically collect literally hundreds of millions in dues from unionized state and city workers, which they can use to engage in partisan political activity.

Obviously, what happens with public sector unions in California also takes place in Illinois too. I encourage you to read the entire post – which is about California reform initiatives to address the problem and “rein in the influence of public employee unions.”

Since President Barack Obama was sworn into office, the U.S. economy has shed 3.4 million jobs and the unemployment rate has risen to 10%. But not all sectors of the economy have been suffering equally. In fact, the sector of the economy most supportive of President Obama has not only avoided contraction, but has actually managed to grow instead.

According to a report released by the Bureau of Labor Statistics (BLS) last Friday, in 2009 the number of federal, state and local government employees represented by unions actually rose by 64,000. Coupled with union losses in the private sector economy, 2009 became the first year in American history that a majority of American union members work for the government. Specifically, 52% of all union members now work for the federal, state or local government, up from 49% in 2008. Or, to better illustrate these statistics: three times more union members work in the Post Office than in the auto industry.

So what? Why should Americans care if unions are now dominated by workers who get their paychecks from governments, instead of workers who get their paychecks from private firms? There’s one simple reason: private firms face competition; governments don’t.

Click here to continue reading this important post – and I’d recommend signing up for the Heritage Foundation’s daily emails. You can learn more here.

Vote with caution this coming Tuesday. The fiscal future of the country is at stake.

Videos

Quotes

“If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions.” —James Madison (1792)